Secretary of State Marco Gatti spoke during item 21 of the Grand and General Council (Consiglio Grande e Generale) agenda, dedicated to the amendment of the State and public entities’ budget forecast for the 2026 financial year. Below is his full address.
Secretary of State Marco Gatti: On behalf of the Secretariat and the government, we tabled, at the opening of this session of the Grand and General Council, our proposed amendments to the State budget forecast concerning this first and only revision of the 2026 budget projection.
Looking at the substance of the matter, the 2026 budget forecast, as presented in December 2025, projected a budget deficit of roughly €13.7 million.
The first reading, submitted in July, revised several revenue and expenditure items, reducing that deficit from €13.7 million to €7.8 million. With this second reading and the amendments now presented, the deficit falls further to €5.6 million — down from the original €13.7 million forecast.
The amendments we have brought before the Council remain consistent with the guidance the government received from the majority — and, I believe, from the whole Council — regarding the need to preserve the structure of a budget.
This is not a finance bill altering a whole series of regulations, but a budget that carries both a technical and political dimension, since the allocations within its chapters inevitably reflect political choices, determining which sectors receive investment and how revenue is distributed among different spending areas rather than others.
Compared with the first reading, under the first paragraph of Article 3, we have essentially removed the possibility of raising the issuance of public debt securities from €450 million to €500 million. That additional €50 million issuance was intended to redeem €50 million worth of irredeemable bonds, marking the start of a gradual conversion process for that instrument.
Given current market trends, which have seen interest rates rise, there was a real risk of greater difficulty in achieving the balance needed relative to Cassa di Risparmio’s results — whose margins would have had to absorb the interest rate gap between the new issuance and the irredeemable bond rate.
Moreover, with only two months left in the year, the technical timeframe for carrying out such an issuance was extremely tight.
We therefore decided to remove the €50 million from both the revenue and expenditure forecasts, since this operation will not take place this year. It may be reconsidered as part of the 2027 budget forecast.
Article 4 has been amended to reflect the new revenue and expenditure projections.
A series of additional articles were also introduced, starting with Article 4-bis, covering the various budget forecasts: that of the State Autonomous Public Works Agency (Azienda Autonoma di Stato per i Lavori Pubblici), which had not been included in the first reading, as well as those of the State Autonomous Services Agency (Azienda Autonoma di Stato per i Servizi), CONS, ISS, the Civil Aviation, Maritime Navigation and Type-Approval Authority, the University of San Marino, and the State Gaming Entity.
These additional articles simply incorporate the amended budgets as approved by their respective governing or administrative boards.
Regarding Article 5, which contains the accounting provisions, we have likewise removed two paragraphs. Paragraph 12-ter had amended paragraph 1-ter, which allowed certain commercial notes to bypass formal registration.
We have chosen to reserve a broader and more thorough assessment of this matter for the full budget forecast process. It was essentially a simplification of administrative procedures concerning the exchange of commercial notes between government offices and their service providers.
As for Article 6, we made a number of mostly formal changes relating to what had already been planned for Expo 2027.
The main revisions concern revenue items, particularly direct and indirect taxes — namely the IGR (general income tax) and the monofase (single-phase) tax. Regarding the IGR, based on the data available to us today, we have continued to apply a prudent approach.
The projected increase takes into account that two months remain before the end of the year, during which some slowdown could still occur.
As for the monofase tax, this also required an adjustment to expenditure, specifically the related reimbursements, since historical trends show a consistent ratio between revenue and expenditure in this area.
We wanted to preserve that ratio in order to maintain, once again, a prudent representation of the year’s financial outcome which, as I mentioned, with a deficit of around €5–6 million, could potentially reach a balanced budget this year — or even a surplus in financial management terms.
We will then see, within the overall balance sheet and income statement, how this translates once all the various provisions and reserves are taken into account.
We have also carried out a series of reallocations between budget chapters: some had provisioned spending capacity that will not be used by year’s end, so we reduced those allocations accordingly. Conversely, we increased funding in other chapters where further spending is expected to be necessary before the end of the year.
In particular, a significant allocation has been made for what has become an unavoidable expense: the purchase of new vehicles, as the Civil Police’s firefighting vehicle has clearly reached the end of its service life. Before it breaks down completely, we have earmarked specific funding to allow an immediate tender process for a new vehicle.
We also adjusted interest costs: projected interest expenses, originally allocated under the relevant cost center, have been revised downward, as have, in part, interest income figures linked to them. The volumes we had expected to manage through bond rollovers turned out, fortunately, to be smaller than initially forecast.
This results in savings on interest expenses, but also slightly lower interest income — which, in any case, would have remained below the expense side. It is, overall, a beneficial outcome.
As I mentioned earlier, in the first reading we had already allocated €2 million for arbitration proceedings under the relevant consultancy chapter of the Congress of State.
Based on current estimates, the actual cost, should proceedings move forward, is likely to be lower than that figure — but we have kept the €2 million allocation in place, since the outcome of the arbitration remains uncertain.
The parties will now need to meet. We do not yet know whether the party that initiated the legal action will maintain its position and proceed with arbitration, or whether it will reconsider in light of the arguments that the Republic of San Marino will present in its defense.
We remain firmly convinced that there are no legal grounds whatsoever for pursuing arbitration in this case, and therefore no basis for reaching any settlement between the parties.
We see no element of responsibility on our part, nor any justification for involving the State in what is, in essence, a completely private dispute between two private parties — one that should be resolved between them, without drawing the State into the matter.
That said, we have provided for what would represent the maximum possible cost of this arbitration, because, should the case not be withdrawn, we intend to proceed firmly and have no intention of entering into settlement negotiations.
